When it comes to paying taxes, it’s not uncommon to struggle to pay the total amount owed. In such cases, the IRS offers several debt relief options. This includes Offer in Compromise, Currently Not Collectible, and Installment Agreement Plan. If you can’t pay all your tax debt at once, you can establish an installment agreement with the IRS. It will allow you to pay off your tax liability over a set period of time. But what if you are assessed with an additional tax debt that, again, you cannot afford to pay in full? Can you have two installment agreements with the IRS? Keep reading to find out.
Understanding IRS Installment Agreements
Before we delve into whether you can have two installment plans with the IRS, it is crucial to understand first what an installment agreement is and how it works. An installment agreement is a payment plan that allows taxpayers to pay their tax debt over time. With this agreement, the taxpayer agrees to pay a fixed amount each month until the tax debt is paid in full. The payment amount is usually based on the taxpayer’s ability to pay, determined by their income, expenses, and other financial obligations.
To be eligible for an IRS installment agreement, you must ensure that you’ve filed all your tax returns and that your payment requirements are current. To set up an installment agreement, complete Form 9465 through the IRS website. If you owe less than $10,000, you’ll likely be approved automatically. However, if you owe more than $50,000, you won’t be able to file electronically. As such, you will have to return a completed IRS Form 9465 on paper with original signatures. Additionally, you may be required to provide details about your income and assets on Form IRS 433-F, which will be used to determine your ability to pay. Regardless of the amount owed, you’ll need to guarantee that you’ll make your monthly payments, as missing payments can result in your installment plan being canceled.
Can You Have Two Installment Agreements With the IRS?
The short answer is no. You cannot have two installment agreements with the IRS for the same type of liability. For example, if you owe back taxes for personal income, you cannot have two installment agreements to pay for the same liability.
However, if you owe back taxes for personal and business income, you may be eligible for two separate installment agreements because the liabilities are different, and the IRS treats them as such.
It’s important to note that if you already have an existing installment agreement and accrue new tax debt, you cannot apply for a new agreement. However, you can amend your current agreement to include the new debt. To do this, you can use the IRS online payment agreement tool and provide information about the original and new balance. Please be aware that changing the terms of your installment agreement is not guaranteed. Therefore, it’s crucial to seek guidance from a tax resolution professional to explore your options for managing your tax debt.
How to Amend Your Existing IRS Plan?
If you are anticipating additional taxes, it’s crucial to update your current IRS payment plan to avoid defaulting on your agreement. It’s important to note that the IRS doesn’t allow multiple payment plans simultaneously. However, you can modify your current plan to include the new tax debt.
To make changes to your agreement, you can contact the IRS directly by calling 1-800-829-7650, visiting your local IRS office, or enlisting the help of a tax resolution professional. Another option is to fill out Form 9465 with the requested information. You’ll need to pay an $89 fee to modify your agreement, regardless of your application method.
When you amend your payment plan, you’ll have the option to change the payment amount, date, and type of plan. However, remember that if you request a monthly payment that’s too low, the IRS will ask you to increase the amount. Remember to include details about your original payment plan balance and the expected new tax debt when changing your agreement.
What Are the Types of Installment Agreements?
When requesting a new installment agreement, several factors come into play in determining the terms. The amount of tax you owe is just one of them. Let’s look at some of the most common types of installment agreements that the IRS grants.
1. Guaranteed Installment Agreement
This plan is for taxpayers who owe less than $50,000, including interest and penalties, and can pay off the balance within four months or 120 days. However, they must also meet specific requirements, such as filing all necessary tax returns. In addition, they must have not entered into any other payment plan in the last five years.
2. Streamlined Installment Agreement
This plan suits those who owe $50,000 or less and cannot pay off the balance in 120 days. The taxpayer should pay off the balance within 72 months, and payments must be at least $25 per month or the full outstanding balance divided by 72, whichever is greater.
3. Non-Streamlined Installment Agreement
If taxpayers owe more than $50,000, they may opt for a non-streamlined installment agreement. To apply for this plan, they generally must submit Form 433-F, Collection Information Statement. They also need to provide additional information such as current financial assets, liabilities, and expenses. The IRS will either accept or reject the request based on the financial information provided in the form and the proposed payment amount.
4. Partial Payment Installment Agreement
This plan is for taxpayers who cannot pay off their tax debt within the 72-month period. With a PPIA, taxpayers can make monthly installments based on what they can afford after deducting essential living expenses.
To qualify for a partial payment installment agreement, taxpayers must demonstrate financial hardship and provide supporting documents and bills. Once the IRS reviews the application, the agency may require them to sell some of their assets to pay off a portion of the liability. If accepted, the IRS will assess the taxpayer’s financial situation every two years. This is to see if any changes may enable them to increase their payments.
If you’re anticipating a tax bill you won’t be able to pay, don’t wait until it’s too late. Modify your existing IRS payment plan as soon as possible. You don’t have to navigate the choppy IRS waters alone – Peace of Mind Tax Help is here to help.
We understand that dealing with the IRS can be a challenging and stressful experience, but we’re here to make it as smooth and straightforward as possible. Our team of experts is knowledgeable in the intricacies of the tax system. We’re here to help you explore all the available options to find a workable solution tailored to your specific needs.